Municipalities’ fiscal outlook is gloomy despite economy

Eight years into Michigan’s economic recovery, the fiscal outlook is still unnerving for municipalities seen as ill-equipped to withstand the next recession.

Despite continued job growth and record auto sales, the state’s per-capita personal income lags the national average after a long-lasting downturn. Taxable values of property — which largely determine revenue for local governments — are below peak levels in 85 percent of municipalities, according to the nonpartisan Citizens Research Council. And their other major revenue source, state aid, is down 20 percent from 15 years ago.

“It’s really a story of fiscal stress,” Jeff Guilfoyle, a vice president of Lansing-based Public Sector Consultants, said this past week at a “fiscal stability” summit hosted by Business Leaders for Michigan, a group of executives at the state’s largest companies and universities. “That fiscal stress is worse in cities than it is in townships and it’s worse in southeast Michigan than it is in the rest of the state.”

Bigger, old cities especially have been thumped with a combination of state revenue-sharing cuts, substantial property tax declines and heavy unfunded retiree pension and health care obligations, Guilfoyle said.

“It’s only a matter of time before the next recession, and we really haven’t seen a significant improvement in the fiscal health of these cities,” he said.